Thursday, May 30, 2013

Foreclosure prevention programs extended because the crisis isn’t over

by Ethan Handelman, National Housing Conference

The Obama Administration announced an extension of the Making Home Affordable Program through December 31, 2015. This extension includes the Home Affordable Modification Program (HAMP), which modifies home mortgages to prevent foreclosure. When combined with the recent extension of the Home Affordable Refinance Program (HARP) through the same date, this announcement means that the existing set of mortgage modification tools will continue to prevent foreclosures for many households.

The extension of the program recognizes that the foreclosure crisis is far from over. Although we are starting to see signs of home price increases in some housing markets, there are still millions of underwater loans, homeowners struggling to make too-high payments, and neighborhoods hurt by foreclosures. The Obama Administration’s announcement today directly acknowledges the ongoing need to help households and neighborhoods prevent further damage from foreclosures and rebuild from damage that has occurred.

CFPB finalizes mortgage rules facilitating affordable housing

by Ethan Handelman, National Housing Conference

The Consumer Financial Protection Bureau (CFPB) announced a final rule amending the ability-to-repay rule that would help nonprofit and community-based lenders finance affordable housing. The amended rule modifies the qualified mortgage requirements enacted in the Dodd-Frank law and largely finalized in a CFPB rule earlier this year. NHC led a coalition of stakeholders to advocate for these provisions with regulators (see the letter from the National Foreclosure Prevention and Neighborhood Stabilization Task Force). The CFPB’s decision finalizes many items advocated by the coalition and represents a strong step forward for affordable housing.

Highlights from the new final rule as summarized by the CFPB (read the final rule on the CFPB web site):

  • Exempt certain nonprofit creditors: The final rule exempts from Ability-to-Repay rules certain nonprofit and community-based lenders that work to help low- and moderate-income consumers obtain affordable housing. Among other conditions, the exemptions generally apply to designated categories of community development lenders and to nonprofits that make no more than 200 loans per year and lend only to low- and moderate-income consumers. Similarly, mortgage loans made by or through a housing finance agency or through certain homeownership stabilization and foreclosure prevention programs are exempted from the Ability-to-Repay rules.
  • Facilitate lending by certain small creditors: This amendment makes several adjustments to the Ability-to-Repay rule in order to facilitate lending by small creditors, including community banks and credit unions that have less than $2 billion in assets and each year make 500 or fewer first-lien mortgages, as defined in the rule. First, the rule generally extends Qualified Mortgage status to certain loans that these creditors hold in their own portfolios even if the consumers’ debt-to-income ratio exceeds 43 percent. Second, the final rule provides a two-year transition period during which small lenders can make balloon loans under certain conditions and those loans will meet the definition of Qualified Mortgages. The Bureau expects to continue to study issues concerning access to credit and balloon lending by small creditors. Third, the final rule allows small creditors to charge a higher annual percentage rate for certain first-lien Qualified Mortgages while maintaining a safe harbor for the Ability-to-Repay requirements.

Wednesday, May 29, 2013

CohnReznick study connects Community Reinvestment Act to Housing Credit Prices

by Ethan Handelman, National Housing Conference

Rental housing practitioners have asserted for years that Community Reinvestment Act (CRA) requirements affect demand for Low Income Housing Tax Credits. A new study from CohnReznick, an NHC Leadership Circle member, analyzes newly-collected data to document the strong relationship between CRA assessment areas and the prices financial institutions will pay for Housing Credits. This is by far the most comprehensive treatment of the subject to date, and it suggests that while CRA and the Housing Credit helpfully reinforce each other, by better aligning the two, government could leave less money on the table. Finding ways to spread investor demand that right now clusters in CRA assessment areas more evenly could help capital flow into underserved areas.

Read more in the CohnReznick study.

Thursday, May 23, 2013

House approves low budget suballocations, setting up battle with Senate

by Ethan Handelman, National Housing Conference

On May 21, the House Appropriations Committee released its 302(b) allocations, which are the levels of budget authority allocated to each subcommittee. The allocation for Transportation, Housing and Urban Development (THUD) is only $44.1 billion, which is $4 billion less than the post-sequestration FY 2013 level. This is an unsustainably low level, and one that reflects the overall 302(a) budget cap of $973 billion the House set earlier this year. NHC, as part of the Campaign for Housing and Community Development Funding, is pressing for a much higher THUD 302(b) spending level.

Ranking Member Nita Lowey (D-MA) observed as much during the markup. She offered an amendment to increase the 302(a) allocation for THUD to $1.058 trillion, the presequester level and roughly in line with the President’s budget request. Notably, Rep. Lowey’s amendment included additional funds to fully renewed property-based Section 8 contracts (which NHC has supported). The amendment was defeated along party lines.

The House THUD appropriation level as proposed is unlikely to become law, but it does set up a major battle with the Senate, which has not yet set its 302(b) allocations. The two chambers set very different overall budget levels; Senate Appropriations Committee Chairman Barbara Mikulski (D-MD) announced a 302(a) level of $1.058 trillion. The House and Senate have yet to come to any compromise or agreement on them. Expect a major battle this year, largely along party lines, over the total amount of federal spending. The course of that battle will be partly determined by how strongly advocates call for funding of essential priorities like affordable housing, and the result of that battle will then flow back downward in the federal spending decisions.

Tuesday, May 21, 2013

The need for disaster-resistant housing becomes tragically clear

by Janet Viveiros, Center for Housing Policy

A home in Union Beach, N.J., destroyed by
Hurricane Sandy. Credit: iStockphoto
In light of the deaths and destruction caused by the tornado in Moore, Okla., yesterday, as well as the tornadoes in Texas and Oklahoma this past week, the need to build disaster-resistant housing is clear. As the disturbing images of damage caused by the tornadoes remind us, many households across the country are very vulnerable to natural disasters. In addition to offering assistance to the victims of these tornadoes, moving forward we must also look at how we can reduce this loss of life and widespread devastation in the future.

I recently attended the Build It Better Leadership Forum which brought together leaders of various industries to discuss how we can “build it better” to improve the safety and resiliency of buildings and communities in the face of hurricanes like Hurricane Sandy. While the focus of the forum was on hurricane risks, the lessons about the importance of sound construction techniques and disaster preparedness are applicable to any natural disaster. One major challenge mentioned several times during the forum was how to effectively educate and make resources available to help homeowners and property owners improve the safety of homes before disaster strikes.

Several organizations and states are actively looking at ways to improve home safety through better construction of new houses, and retrofits of older houses. The Federal Alliance for Safe Homes (FLASH) is a no-profit consumer advocate for disaster resistant housing. The organization provides information to consumers and builders about ways to construct or retrofit homes to better withstand various natural disasters. This includes detailed designs and estimated costs of safe rooms which offer greater protection to families and individuals sheltering in their home during a tornado or storm with high winds.

Improving the safety and resiliency of a home is a concern for all households. However, low- and moderate-income households have fewer resources available to invest in disaster resistance retrofit projects for their homes. Low-income individuals are often the least able to prepare for and respond to the damaging impacts of natural disasters. It is important that state and local governments, as well as local non-profits, examine ways to make disaster retrofit projects affordable to low- and moderate-income households.

One state that has taken the lead in this area is South Carolina. The South Carolina Safe Home program offers grants and matching funds to low- and moderate-income homeowners in coastal counties to complete retrofits on their homes to mitigate damage from severe storms like hurricanes. The mitigation measures also make homeowners eligible for discounts on homeowner insurance policies. These incentives are just one way to help low- and moderate-income households to make their homes safer. All states and local governments should examine the risks that their communities face, as well as the special needs of vulnerable populations and low- and moderate-income households, and then develop strategies to help all households prepare before a disaster.

My thoughts are with all those impacted by the tornadoes this week.

Friday, May 17, 2013

House panel pushes FHA on reverse mortgages, multifamily consolidation and more

by Ethan Handelman

The Housing and Insurance Subcommittee of House Financial Services examined three Deputy Assistant Secretaries from FHA’s Reverse Mortgage, Multifamily Housing, and Healthcare Programs on May 16. Members had sharp questions for the witnesses who were pushed to defend agency decisions and identify corrective measures in the face of a possible FHA draw on the Treasury. Participating members were Neugebauer (Chair, R-TX), Luetkemeyer (Vice Chair, R-MO), Capuano (Ranking, D-MA), Royce (R-CA), Cleaver (D-MO), Clay (D-MO), Beatty (D-OH), Himes (D-CT), Fitzpatrick (R-PA), Heck (D-WA), Sherman (D-CA), and Ellison (D-MN).

Reverse mortgages

Charles Coulter, Deputy Assistant Secretary for Single-Family Housing faced sharp questions from Rep. Neugebauer on the capital shortfall identified in FHA’s actuarial report and the substantial role of the reverse mortgage program in losses thus and to come. Coulter emphasized the importance of the reverse mortgage option for seniors facing financial hardship, particularly now that private capital sources have fled and FHA is the only option in the market. Coulter identified steps taken already to reduce up-front draws and improve loss mitigation efforts but focused attention on the Congressional action needed to empower FHA to take further needed steps, particularly around underwriting non-borrowing spouses. Reps. Heck and Fitzpatrick noted that their proposed bipartisan bill would provide FHA the need authority to get the program on track. Reps. Royce and Luetkemeyer both pressed Coulter to address local-level proposals to seize mortgages by eminent domain and then refinance through FHA, asking him to mirror the GSE refusal to accept such loans. Coulter shared their concern and offered a formal written response rather than an off-the-cuff policy decision. Rep. Capuano raised further questions about whether separate accounting treatment for the reverse mortgage program would bring clarity and whether the agency could restrict private originators from using actors and game-show hosts as spokespeople on late-night television ads (Rep. Capuano had noticed the ads during his evening viewing).


Marie Head, Deputy Assistant Secretary for Multifamily Housing, presented HUD’s proposal to consolidate its multifamily operations. She, too, faced tough questioning on that and other fronts. Representatives Sherman, Clay, Cleaver, and Ellison each raised concerns about loss of trained staff, local relationships, and valuable asset management capability as a result of consolidation. Rep. Neugebauer pushed for an explanation of FHA’s role in the multifamily market, whether it had expanded beyond its mission, and whether it had focused too much on properties outside its existing portfolio, particularly with refinancing. DAS Head clarified that less than 10 percent of the refinancing came from the GSE portfolio, that the rough breakdown of loans is 25 percent rural, 50 percent suburban, and 25 percent urban, and that 40 percent of the overall business now is refinancing. She also emphasized the need for additional commitment authority so that FHA Multifamily could continue operating through the balance of the year.

Health care

Roger Miller, Deputy Assistant Secretary for Healthcare Programs, faced fewer questions overall from his testimony on FHA’s financing of hospitals, nursing homes, and assisted living facilities. Rep. Neugebauer explored whether some of FHA’s loans to hospitals consumed a disproportionate share of commitment authority, noting in particular New York Presbyterian Hospital. Miller explained how the loan relationship began in the 1980s when the hospital was struggling and evolved over time as the hospital improved and merged to its current form. He also noted their $81 million commitment to indigent care.

See written testimony and archived webcast on the hearing page.

Thursday, May 16, 2013

Senate hearing shows government guarantee necessary, explores options for private capital bearing mortgage risk

by Ethan Handelman, National Housing Conference

The Senate Banking Committee’s Subcommittee on Securities, Insurance, and Investment heard testimony on Tuesday from a range of experts on mortgage finance. Senators in attendance, all with thoughtful questions, were Jon Tester (Chair, D-MT), Johanns (Ranking, R-NE), Jack Reed (D-RI), Mark Warner (D-VA), Elizabeth Warren (D-MA), and Bob Corker (R-TN). The title of the hearing “Returning Private Capital to Mortgage Markets: A Fundamental for Housing Finance Reform” accurately represents the theme of the questions and testimony, which focused on different mechanisms for causing private capital to bear risk ahead of government.

The witnesses largely agreed that in the short term, a continued government guarantee role was necessary to enable mortgage markets to function and that change should come gradually. Although several witnesses suggested that eventually government backing could be removed entirely, Mark Willis observed that at some point the cost in reduced access and affordability might not be worth further reduction of the government’s role.

Senator Warren encapsulated the discussion by observing that all the witnesses favored a layering of risk with private capital ahead of an explicit government guarantee paid for by a fee. The witnesses vary in their recommendations for getting the pricing of the guarantee right and the mechanisms for layering risk, and each has concerns about the incentives and loss-bearing capacity of the entities bearing risk.

Senators explored several structures for risk-layering, including an A-piece/B-piece structure similar to the Freddie Mac K-series, credit-linked notes, and an insurance-based model, with Senators Corker and Warner particularly interested in the A/B structure. Questions also raised issues of how and when mortgage limits should come down, what we should look for as FHFA causes Fannie Mae and Freddie Mac to test risk-sharing structures, and whether requiring private capital first limits government’s ability to step in when private capital flees.

The hearing closed on an optimistic note, as Senator Warren raised the possibility of data-tagging as a new source of much better information on loan performance that could inform future regulation.

List of witnesses with links to testimony plus archived webcast:
  • Dr. Mark A. Willis [view testimony]
    Resident Research Fellow
    Furman Center for Real Estate and Urban Policy, New York University
  • Mr. Andrew Davidson [view testimony]
    Andrew Davidson & Co. Inc.
  • The Honorable Phillip L. Swagel [view testimony]
    Professor of International Economic Policy
    University of Maryland School of Public Policy
  • Dr. Robert Van Order [view testimony]
    Department of Finance and Professor of Finance and Economics, George Washington University School of Business

Wednesday, May 15, 2013

Permanent Supportive Housing Helps Struggling Veterans Recover

by Maya Brennan, Center for Housing Policy

Permanent supportive housing helps chronically homeless veterans make headway toward recovery. While some veterans become homeless due to a temporary economic setback, veterans who are chronically homeless typically have more substantial challenges to overcome. As we've noted before on this blog, ongoing support can help veterans recover from traumatic brain injury, substance use disorders, military sexual trauma, and other similarly serious impediments.

Veterans homelessness is an important national issue, but it is also personal to me. Through my volunteer activities outside of NHC, I have built friendships with homeless veterans struggling through recovery.

NHC’s new Veterans Permanent Supportive Housing guide highlights strong programs that provide a combination of services and affordable housing for the men and women who have served our nation but now need our nation’s help in return. The examples show that three key elements are essential for success:
  1. property-based rental assistance to allow rents to be affordable for extremely-low income veterans,
  2. little or no hard debt so that properties’ rent revenue can support operating costs rather than mortgage payments, and
  3. dedicated supportive services funding to ensure the ongoing availability of the services that residents need.
Silver Star Apartments in Battle Creek, MI
Places like Silver Star Apartments in Michigan, Hope Manor in Chicago, New Directions in Los Angeles, and American Legion Apartments in rural Connecticut all exist because of programs like HOME, project-based HUD-VASH and Housing Choice Vouchers, Low-Income Housing Tax Credits, Enhanced Use Leases of VA land, and other federal sources. State and local governments also provide important assistance through administration of federal funding programs as well as state and local grants, tax credits, soft loans, and land donations.

We need to keep and strengthen the programs that work. See the guide for our six key recommendations.

Our nation’s most disadvantaged veterans need our help. Let’s answer the call.

(This blog post is dedicated to Charlie, a Michigan native, homeless veteran, and fantastic human being who we lost too soon.)

Thursday, May 2, 2013

More than a quarter of working renter households spends more than half of income on housing

by Janet Viveiros, Center for Housing Policy

The Center's new Housing Landscape 2013 report, which I co-authored with my colleague Maya Brennan, is out today. It finds that severe housing cost burdens among working renter households rose for the third consecutive year due primarily to falling incomes and rising rental housing costs. Nationally, working renters saw their housing costs rise by 6 percent from 2008 to 2011, while their household incomes fell more than 3 percent. Renters are stretched so thin by growing housing costs that many face impossible choices.

While severe housing cost burdens stayed relatively stable for working homeowners between 2008 and 2011, working homeowners have not avoided the effects of falling incomes. In fact, while housing costs among homeowners fell some 3 percent over the study period, household incomes among these homeowners fell even more than they did for renters, down more than 4 percent over the three-year span. Roughly one in five working homeowners experienced severe housing affordability challenges throughout this period – despite falling home prices and mortgage interest rates.

Between 2008 and 2011, the rates of severe housing cost among working households increased in 24 states and 18 major metropolitan areas. Only 1 state and 2 metropolitan areas saw decreases in severe housing cost burden rates during this time were few.

For many more detailed results, find the full report at

Rep. Mel Watt nominated for top FHFA post

by Ethan Handelman, National Housing Conference

Yesterday, President Obama nominated Representative Mel Watt to lead the Federal Housing Finance Agency (FHFA), the agency which oversees Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. The current FHFA Acting Director, Ed DeMarco, has served in an acting capacity since 2009.

President Obama congratulates Rep. Watt
at the nomination announcement.

Representative Watt, a Democrat, currently represents North Carolina’s 12th district. He serves on the House Financial Services Committee, including the Subcommittee on Capital Markets and Government Sponsored Enterprises and the Subcommittee on Financial Institutions and Consumer Credit, which has responsibility for much housing policy.

The post of FHFA Director requires Senate confirmation, and it is unclear whether Rep. Watt will clear that hurdle. At a recent Senate hearing on mortgage finance reform, Sen. Corker expressed disapproval of a possible nomination of Rep. Watt in reaction to circulating rumors. Statements in favor of confirmation are already appearing, and the President endorsed Rep. Watt strongly at the nomination announcement.